It is an extension of DTS' previous DTS Coherent Acoustics codec. Prior to 2004, it had been known as DTS++. Though DTS-HD Master Audio is an optional audio format for Blu-ray Disc format, by 2010, it had steadily become the standard for Blu-ray lossless audio format.
One goal of the DTS-HD Master Audio format was to allow a bit-to-bit representation of the original movie's studio master soundtrack. To accomplish this, DTS-HD Master Audio supports variable bit rates up to 24.5 Mbit/s on a Blu-ray Disc and up to 18.0 Mbit/s for HD DVD. The format supports a maximum of 192 kHz sampling frequency and 24-bit depth samples from 2 to 5.1 channels, and 96 kHz/24bit resolution up to 7.1 channels. DTS-HD is capable of virtually any number of discrete channels but is limited by storage media.
When played back on devices which do not support the Master Audio or High Resolution extension, it degrades to a "core" track which is lossy.
According to the DTS-HD White Paper, DTS-HD Master Audio contains 2 data streams: the original DTS core stream and the additional "residual" stream which contains the "difference" between the original signal and the lossy compression DTS core stream. The audio signal is split into two paths at the input to the encoder. One path goes to the core encoder for backwards compatibility and is then decoded. The other path compares the original audio to the decoded core signal and generates residuals, which are data over and above what the core contains that is needed to restore the original audio as bit-for-bit identical to the original. The residual data is then encoded by a lossless encoder and packed together with the core. The decoding process is simply the reverse.